Futures Trading

The day chart below shows all signals generated YTD in the Lumber (LBS #F) market; including the most recent long signal generated 9/19. This latest long trade is in the money – as LBS closed at a new weekly highs for 2016 at the end of last week. 

I am showing all signal outcomes in 2016 (long and short) in 6 lot position sizing:

Along with annual trading P/L since 2009 (6 lots):

The Lumber ‘program’ has generated mean profits of ~90,000/yr, trading 6 lots since 2009.  The 2016 trading year is generating wins (57% profitable trades), however, the payout is tighter this year as per the smaller net profit (~27,000).  In systematic trading, you never really know when the equity curve is set to trade higher, and so the discipline is in staying with historically high % winning programs (or assets).  In other words,  the trader can generate expectation based on historical payout ratio’s (avg $ win/loss, % win rate) but the returns will deviate around these median values. I look at the chart reflecting 2016 trades in Lumber and the profits were contributed by 4 of the 14 signals (3 long, 1 short) — if the trader ‘felt’ discouraged by the results (say at some earlier point in the yr), and decided not to participate in a ‘trade or two’ to ‘see’ how the market would develop, you probably would have missed the ride on some of these larger winners, eroding performance metrics consistent with the asset and the portfolio at large. My rule in systems trading is to stay with the high performing markets through draw-downs.

 

 

The most recent trade in the GBX Dec contract triggered ‘short’ Sept 30th — as per the most recent ‘gray’ down arrow on the day chart below. The MST swing Algo has been active in the German BUXL during this seasonal trading period (Sept-Oct). To date; 4 trades have been generated: 1-2 + current open position.

Trade 1: 9/6 Long Entry at 193.32. Stopped 188 = -5.32pts/contract

Trade 2: 9/9 Short Entry 186.62. Exit =191.14 = -4.52pts/contract.

Trade 3: 9/22 Long Entry 191.14. Exit = 191.76 = +0.62pts/contract

Trade 4: 9/30 Short Entry 191.76 OPEN.

Net P/L = -10.12pts/contract.

Clearly, the trading has bee choppy and in a high level, narrow bracketing pattern. And so the outcomes have been reflective of the conditions. Having said that, this market is a statistically strong performer and my objective to stay with all trades that are generated.

The series of gray arrows below shows the sequence of trades:

I have also attached a past performance of the BUXL since 2007

The BUXL has not had a losing trading year to date during seasonal trading time frames May-June and Sept-Oct.

I am posting recent short alerts taken, flipping previous long positions:

As per the day charts below, Lumber went long 6/9, and has rotated lower since, generating a short entry 15/9, for a loss of -10$/contract from the previous long signal (blue up arrow):

The BUXL went long for the first trade of the Sep-Oct seasonal program 6/9 (grey up arrow), which rapidly reversed following ECB comments two days later 8/9. This reversal was impart bad luck, as the announcement fell on the last trading day/roll for GBX U6 to GBX Z6, and as such, the GBX U6 which was still on the board….illiquid, as a result did not generate what should have been a short signal on this day (8/9), as the Dec contract was the front month, but not on the baord. And so, I was forced to exit the market at a loss, meanwhile the Short entry signal was triggered 9/9 (the following day) which had seen the market move 10pts (continuous contract) as per the day chart below. If that signal had been generated on the ‘roll’ this would have been a highly profitable short trade, completely offsetting the previous loss on the long trade…..and some. This new entry in the Dec contract, as per the ‘grey down arrow’ associated with the red bar, is not optimal trade location on the day chart, leaving some risk with a stop at the 196 level.

Just as the chart appeared to be ‘looking good’ for a long USD Index trade, late last week, my latest short in CHF was stopped out today with some profit however modest.

We can view the series of trade signals in 2016 for the Swiss Franc futures as per the above day chart. The market has been trading in tight, relatively quiet uptrend, and has generated some mixed data, winning 2/5 trades with a net loss of -762/contract traded. Today looked interesting as all currencies generate coordinated signals: Eurocurrency – Long, USD Index – Short, and on Friday the British Pound went long. The set-up in the Swiss Franc above, is a ‘low risk’ trade from the long side, given the series on long signals between 1.00-1.02 – basically the last 3 long signals this calendar year. So the market appears to be coiling and getting ready to move – up/down. Given the push higher today in Gold, and the possibility of seeing a reversion in the GBP, since the BREXIT breakdown, I like the anti-dollar trade for the moment – in CHF. Though we would still nee to see the Dollar break the 93 point level for a more sustained Dollar-inverse trade.

The program flipped on the Lumber trade today, and I went long a 5 lot. Here is a closer look at the day chart below, showing all trades in 2016:

LBS  has a 60% 10 yr win rate, which is an ‘extra-ordinary’ win rate. This market is a year-round trading vehicle, ~10 trades/yr. Payout ratio = 2.20x. The market has suffered 1 annual loss – in 2014 of -$5000, trading 4-5 lots. This is a ‘controlled’ market in response to the MST program and a stalwart market. I like the trade location here as per the most recent blue up arrow. Anything below the most recent pivot on the chart at ~300 is the stop. The trend in Lumber is still up in 2016 – and given the moves across most of the commodity space, specifically softs –  I like the R/R on the trade here.

 

Today was a ‘rotation’ day for the MST program – across most assets – on the back of weak service PMI at 10am EST, which initiated trend changes across the futures markets.  I do not trade news, fundamentals, nor do I speculate on that – this program/site is focused on deriving implicit market-generated momentum-type days that may suggest or imply short term trend changes.  In the FI space, GBM ‘seasonal’ trading began on Aug 18th and generated its first trade today. As far as getting long the FI space – with NIRP in place – I would prefer to be on the long side of FI, with emphasis across the Euro-FI space. This long signal today was broad based, as French Gov Bonds signaled long (OATs), as did the Swiss 30yr bond. Across the pond,  the short-intermediate duration in the US also went long today (5s + 10s) – but not the 30yrs.

The continuous futures chart looks like this:

with the most recent grey arrow indicating the signal. There appears to be a ‘double bottom’ at the 188 level – so anything below this on a daily closing basis would suggest I am on the wrong side. Overall, there’s ~4pts of risk = $4000/contract – and this looks to me like a bracketing set up with the upside at 196-198. There’s a lot of ‘technical’ space on the chart below 181 level, but the chart is moving to the upper right side, despite the ‘lofty’ feel of the FI space YTD.

We can also examine the historical seasonal trade below as follows:

We have trades dating back to 2007;

40 total signals. 53% win rate. Trading a 3 lot, MST has generated 8/10 profitable years during this time frame. The BUXL market ‘personality’ trades quite  intuitively as a program system. Lets see how goes.

Below, I’ve captured images from my trading statements that reflect MST ‘total P/L’ in 2016: This is a futures program predominantly, however, there are strategic equity-linked ETF products that have found a place in my trading roster of assets. These metrics have not been displayed. I have detailed records of historical monthly performance metrics here; my own PA copied below reflects results using a multi-contract (futures)/market approach (leveraged approach) .

I am including a table below that displays trading results from previous years using my own leverage model:

These results indicate that 2016 trading has been a statistically weaker year, as previous years’ mean annual profits have approximated $400,000 (without adjusting the leverage model). The underperformance of 2016 is a function of the complete absence of vol, but may suggest that the system could mean revert over the next 4 months to historical means – or not.

As a systems trader, I am cognizant of the fact that market conditions may be adversely effecting my program alpha, ie., absencve of Vol in 2016 – though it is highly unlikely that these conditions are here to stay.  I have tried to mitigate this actuality (egde-erosion) by implenting plain vanilla rules, timeless-rules, as the basis of MST trading paradigm – by working to simplify – by not over-optimizing – using a standard overlay for all markets/assets traded…..but time will test my luck.

 

 

Coming off the Jackson Hole FED reaction today MST generated a LONG signal entry in the DX (Dollar Index), which closed out an existing short position as per the recent ‘green up-arrow’ on the Day-Chart below:

The DX long entry position simply offsets the short position as per the ‘red-arrow’ from the day chart above. This trigger in DX marks the end of the ‘seasonal’ USD Index trade for 2016, which started in March-July; ie., any signals that are generated in this timeframe are ‘actively’ traded:

1st Seasonal DX trade (2016): Long

Entry: 06/23/2016 (BREXIT DAY) = 94.20.

Exit:  07/27/2-016 = 96.835

Profit (1 lot): 2.635/contract = $2,635/contract

2nd Seasonal DX trade:  Short

Entry: 07/27/2016 = 96.835

Exit: 08/26/2016 = 95.02

Profit (1 Lot): 1.815/contract = $1,815/contract

Total P/L for DX trades in 2016 = $4,450/contract

The trade location on this long DX U6 signal looks good, though i did not take it, staying consistent with my trading plan,but I did re-enter my SHORT position in the CHF (Futures 6S U6) (Swiss Franc):

From the day chart above we can reference the most recent system-generated ‘short’ signal as per the (most recent) ‘red down-arrow’; I didn’t like the trade location on this, but CHF is one of my more ‘consistent performing markets over 10 yrs, and I take all signals generated in the markets that I trade. Having said that, I was stopped out of my Short position in CHF U6 futures above the 1.04 level, as the market head-faked. By observing the activity across most asset classes today, and given the Dollar strength it appears as though there may be a reinvigorated down-trend in currencies ‘against’ the Dollar Index re-emerging, with CHF being very strongly and inversely correlated to the USD Index. So I re-entered the market short in CHF, based on the ‘Long’ USD INDEX (DX) long signal, and given the intraday-type momentum reversals that occurred – as most asset classes experienced key outside reversals off the initial comments made by Yellen, which were reversed (faded) into the close today.

My portfolio at the end of the day looks like this:

 

 

Current open positions

Futures markets traded in the month of August can be viewed here

All open positions are based on automated signals

 

 

Markets traded can be seen in the ‘business case’ tab.